AAA drops insurance in Florida after farmers

AAA will not renew auto and home insurance policies for some Florida customers, joining a growing list of insurers that are reducing their footprint in the Sunshine State amid rising natural disaster risk.

“Unfortunately, Florida’s insurance market has become challenging in recent years,” the company said in a statement emailed to CBS MoneyWatch. “Last year’s catastrophic hurricane season contributed to an unprecedented increase in reinsurance rates, making it more costly for insurance companies to operate.”

AAA declined to say how many customers would not have their policies renewed, saying only that a “small percentage” of policyholders would be affected by the change.

The company is the fourth insurer in the past year to say it is phasing out coverage for Florida residents, a sign that climate change-related extreme weather is destabilizing the insurance market. Farmers Insurance recently said it would no longer offer coverage in the state, affecting approximately 100,000 customers.

Farmers said the move would only affect company-branded policies, which make up about 30% of policies sold in the state.

Bankers Insurance and Lexington Insurance, a subsidiary of AIG, pulled out of Florida last year, saying recent natural disasters have made residents’ insurance too expensive. Hurricanes Jan and Nicole devastated Florida in 2022, causing billions of dollars in damage and killing about 150 people.

Under Florida law, companies must give the Insurance Authority three months’ notice before they tell customers that their policies will not be renewed.

Some insurance companies in Florida have gone bankrupt in recent years due to huge payouts due to hurricanes. However, drivers and homeowners who opt out of AAA have the option of finding a new insurance company. According to the Florida Insurance Companies Database, hundreds of companies, including Allstate, Esurance, Geico, Hartford, and 21st Century, still offer policies in the state.

Rapid homeowner spending

Already, homeowners in the state are paying about three times the national average for insurance coverage, and rates are expected to rise by about 40% this year.

Insurance companies are leaving Florida, despite the fact that in December lawmakers passed a law aimed at stabilizing the market. Gov. Ron DeSantis signed legislation last year that, among other things, creates a $1 billion reinsurance fund and introduces measures to discourage unfounded lawsuits. The law will come into force in October.

AAA said it was encouraged by the new measure, but noted that “these improvements will take some time to fully materialize and until they are implemented, AAA, like all other service providers in the state, are being forced to take tough solutions for risk and disaster risk management”.

Insurers are orchestrating a similar exodus in California, where AIG, Allstate and State Farm have stopped taking on new customers, saying wildfires increase the cost of insurance policies. Scientists say climate change has made the West warmer and drier over the past three decades and will continue to make weather more extreme and wildfires more frequent and destructive.

More than 1.2 million homes are at risk from severe wildfires in California, more than any other state, according to data compiled by the industry’s Insurance Information Institute.

Insurance premiums are also rising in Colorado due to the risk of wildfires, and Oregon’s attempt to map the risk of wildfires was rejected last year due to fears that it will lead to a sharp increase in insurance premiums.

Content Source

Related Articles